VIDEO: Our Road Map for This Funky Trading Week

In today’s Daily Rundown video, Chris Versace discusses what the portfolio will be watching this week, including the Flash June PMI reports and why we’ll be paying close attention to quarterly results from KB Home KBH and Lennar LEN.

Transcript

CHRIS VERSACE: Hey, folks. Chris Versace here. Monday, June 17th. The start of a kind of funky week for the market. I say that because we have the Juneteenth holiday on Wednesday, and that will see the stock market closed for trading, at least in the US. And it kind of means that we've got a bifurcated week. We've got Monday, Tuesday, and then Thursday, Friday.

You know, my thinking-- just because of the way the holiday is going to fall-- that we could see some thinner than usual trading volume, and I wouldn't be surprised if folks are kind of getting an early jump on the summer vacation season. Even so, there's going to be several things that we want to pay attention through throughout the week as it relates to the market, the economy, and yes, the portfolio.

So let's kind of share the game plan for the week ahead. Well, Tuesday we're going to get retail sales. A big barometer on consumer spending, obviously, but one that we will want to dig into ascertaining what it means for our positions in Costco, Amazon, Pepsico, Mastercard, and a few others. Remember that some folks tend to look at the retail sales report on a sequential comparison.

Our preference is to take a look at what it is for year over year comps. Why? Because that's how most companies tend to report their retail comp sales. So, we want to make sure we have an apples to apples metric that can serve as a yardstick as companies like Buckle, like Costco, and others report their monthly sales.

Tuesday's also going to bring the May industrial production report, and there's a few things in here. Data on mining, data on utilities, but we'll want to focus on manufacturing. And I say that because remember that when we got the May manufacturing PMIs from ESM and S&P Global, they kind of showed two different things.

S&P Global showing an acceleration in manufacturing activity, ISM showing some continued weakness in that part of the economy. So, leaning into the manufacturing production data should help us get a clearer picture on what's going on in that part of the economy. Then Wednesday, we're off. Juneteenth, as I mentioned.

Thursday, however, brings housing starts and building permits. We are going to want to take a close look at this, given our new position in Builders FirstSource. You know, what we'll be looking for is any potential surprise to the upside in housing starts, particularly single family. That's the key driver for builder. And if we do see that, it would kind of make us incrementally positive on the builders story, but it would also be a positive for our shares of United Rentals and Vulcan Materials, as well as helping drive some incremental demand for waste management and waste disposal as well.

Friday, we wind up getting the flash PMI for June. You know that we like to pour over this report very closely. This will be the first real snapshot we get for the month of June, so we'll be seeing what the flash data has to say for the tone of the manufacturing economy and the services economy, comparing it to the prior month, seeing if there's a pickup.

This also means we'll be looking at the new order data. First, look at how we might be starting off the second half of the year. We'll also be paying attention to employment conversations that are revealed. But also too, input and output cost inflation. What we'll want to see is continuation of what we saw in last week's May CPI and PPI reports.

If we do get that, that's going to signal that we should see some further improvement in the June reports for those metrics. That would be a very positive thing for the market, as it would help lean the Fed that much more closer to the start of rate cuts. And as we've talked about, that would be positive for several positions in the portfolio, especially the recently added Builders FirstSource.

Now, throughout the week, we are going to get a number of Fed officials speaking. By last count, it's going to be more than eight, heavily clustered, with some later today and then a big number tomorrow, Tuesday. So we're going to want to pay attention to what they have to say. I do expect they will come out and reiterate what Fed Chair Powell said.

But remember, in Powell's comments during last week's presser, he admitted that the Fed was a little conservative in its outlook. He also said that a number of folks did not update their economic projections to reflect the data found in the May CPI report, so we will really want to be parsing Fed speaker comments this week because May CPI report, May PPI report also late last week.

And we'll want to see, are they incrementally positive on the data? Is anybody kind of softening? Is it maybe one rate cut, maybe two? We know the market even though, you know, the Fed's projections said one. The market is keeping the door open for two. So if we see more good data, and these Fed comments saying they are seeing more improvement, we could see expectations for rate cuts.

You know, March a little higher than they were last week. Again, positive for some of the positions in the portfolio, including Builders FirstSource. But also, as it relates to Builders FirstSource, when we look at the earnings that are out over the coming week, Lennar, KB Home, two big publicly traded home builders. We'll want to compare what they have to say against the housing starts data that we'll get, but also what they're seeing for the back half of the year.

That will help set the tone for Builders FirstSource. And again, if we see supportive data, it could lead us to buy some incremental shares of BLDR. We also have earnings from Darden and Kroger this week. With Darden, our consumers, you know, trading down in their menu choices. Or are the overall, you know, traffic visits falling because people are pivoting away and increasingly eating at home given the inflation impact on dining out?

We'll be able to ascertain that by comparing and contrasting what we hear from Darden and from Kroger. But with Kroger, too, we also want to hear, are people trading down? What is happening with their private label business? Is it taking off? That'll help us revisit, rethink about the shares of treehouse foods that are in the bullpen.

So with that, members, I would say please be sure to check your emails, check your alerts. We want to make sure that you're getting our latest thoughts, and any moves that we make might-- excuse me, any moves we might make with the portfolio because we want you right there with us. Thanks for watching.

At the time of publictaion, TheStreet Portfolio has no positions in any securities mentioned.